Last week, Mick Mulvaney, the acting director of Consumer Financial Protection Bureau, emailed his staff and explained his vision for the agency. His plan amounts to this: we’ll vigorously penalize those who cross a bright red line of legality—but leave everyone else alone.
In his email, Mulvaney frames this vision as a stark contrast to the approach of the CFPB’s former director, Richard Cordray, who reveled in “pushing the envelope.” Mulvaney describes Cordray’s “governing philosophy” as one that “frightens [him] a little.” Bureau enforcement will now prioritize “quantifiable and unavoidable harm to the consumer.” Under Mulvaney, the bureau “won’t go looking for excuses to bring lawsuits,” he wrote.
What does this mean for the real estate industry, especially for enforcement of the Real Estate Settlement Procedures Act (RESPA)? Time will tell, and it’s too early to say for sure. For now, everyone should assume the status quo for REPSA, and you should stick to your previous regulatory guidelines. (Remember state regulators are free to implement their own visions—and to push the proverbial envelope.)
But this could be a sea change in federal RESPA enforcement. For instance, we can assume that Mulvaney’s CFPB will pursue anyone who pays a kickback for a referral in a real estate closing. But other, indirect forms of payment, which some have traditionally considered kickbacks, might no longer arouse the bureau’s suspicion. So Zillow’s business model, in which lenders pay to appear in advertisements alongside real estate agents, for example, is not strictly prohibited by RESPA or any existing regulation. Mulvaney’s CFPB might well have no problem with that model, even though Cordray had been trying to rein in the practice for years.
Even more commonly accepted forms of indirect kickbacks might pass muster in the Mulvaney regime. For instance, overpaying for renting desks or office space could be a subtle form of kickback—and it has long been considered one—but the new, restrained CFPB might no longer think that.